Electronic Arts’ NBA Live used to be a best-seller, but after declines in quality starting in 2007 or so, lukewarm rating scores followed. By 2010, Electronic Arts Inc. (NASDAQ:EA) dropped the series entirely after dismal sales results. Take-Two Interactive Software, Inc. (NASDAQ:TTWO) seized the opportunity and released the landmark NBA 2K11 featuring Michael Jordan on the front cover; the game certainly did Jordan justice, as IGN editors scored it a 9.5.
The NBA 2K series has continued in successful fashion and sales have grown significantly. Electronic Arts remains out of the basketball market, resulting in a painful cessation of market share to Take-Two. Similarly, Electronic Arts may decide to discontinue its Tiger WoodsPGA Tour franchise, a golf game that once sold incredibly well but has recently fallen off a cliff in popularity.
You’re right if you guessed that this decline coincides with a lower average review score for the series — I know that Tiger has had his personal issues, but game critics attribute the low scores to uninspired gameplay and a lack of significant improvements.
At the same time, other Electronic Arts Inc. (NASDAQ:EA) sports titles such as FIFA and NHL have sold well and garnered consecutive years of great scores in the 8.5 to 9.5 range, with competitors opting to concede to Electronic Arts in these markets. Despite the recent divergence in reception between Tiger Woods PGA Tour and NHL, the reviews still give consistent attention to addressing the accolades, shortcomings, quality of programming, and special features of each game.
Because different development units within a particular company create different game franchises, reviews can help reveal which of these units are pulling their weight and which are struggling. For savvy investors, this information can provide a future view of where management may focus its strategic adjustments.
The Foolish conclusion
In such a fast-paced and competitive industry, reliable insight into the true nature of the product can be hard to find; game ratings and reviews solve this problem by sniffing out all the rotten eggs. Investors can use this information to gauge quality and sales potential, and assess what these aspects say about the future of the company.
From a top-down view, management’s response to critical reception in the gaming community completes the feedback loop: does the company close a production studio, shake up the C-suite, or make an acquisition? Conversely, sometimes developers produce games that score in the 9.5 to 10 range; these numbers are reserved for truly exceptional work, and such an accomplishment should resonate with investors.
As a recommendation, if you own or are considering Electronic Arts Inc. (NASDAQ:EA), Activision Blizzard, Inc. (NASDAQ:ATVI), or Take-Two Interactive, be sure to check check the review sites. I have seen too many uninformed gamers buy heavily-marketed junk, and as an investor, you don’t want to make the same mistake.
Andrew Gill has no position in any stocks mentioned. The Motley Fool recommends Activision Blizzard and Take-Two Interactive . The Motley Fool owns shares of Activision Blizzard.
The article Video Game Reviews Matter: To Gamers and Investors originally appeared on Fool.com.
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